Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
OUTLINE
• Introduction
• Filing of PPT Returns
• Basis of Assessment
• Accounting Period
• Format: PPT Computation
• Capital Allowance
• Condition for Granting Capital Allowance
• Type of Capital Allowance
• Annual Allowance
• Petroleum Allowance
• Restriction on Capital Allowance
3
INTRODUCTION
• The Petroleum Profit Tax (PPT) is chargeable upon the profit of any
company engaged in petroleum operations in Nigeria.
SERVICE CONTRACTS:
• This is similar to PSCs except that the Service Contractor has no title to the oil. His
costs could be reimbursed either in cash or in kind. The Contractor is paid a fee
for his services instead of profits (It is a Cost-plus arrangement). However, the
contractor has the first option to buy back the crude oil produced from the
concession.
MARGINAL FILEDS/SOLE RISKS:
MARGINAL FIELDS: These are fields left unattended by IOCs (JVs) for at least ten
(10) years. Government seizes such fields and reallocate to Nigerian Companies.
Beneficiaries enter into agreement with the JV Company and they pay Overriding
Royalty to the IOC on production in addition to usual Royalties to Government.
There is no government participation.
SOLE RISK: These are generally those operations in concession areas that do not
involve government participation The operator bears all the risks, pays royalty on
production and PPT. Sole risk operation can also occur in a JV scenario where a
partner single-handedly undertakes petroleum operations based on the
unwillingness of other parties in a project.
6
All companies are obligated under law to file tax returns (Income
Tax, VAT, WHT, CGT)….Section 55 of CITA, Section 31 of PPTA
7
FILING OF PPT RETURNS : CONTENT OF PPT RETURNS
• BASIS OF ASSESSMENT
ACCOUNTING PERIOD
• the day the company first makes a sale or bulk disposal of chargeable oil
under a program of continuous production and sales, domestic, export
or both and ending on 31st December of the same year; or
• any period of less than a year commencing on 1st January of any year and
ending on the date in the same year when the company ceases to be
engaged in petroleum operations.
FORMAT: PPT Computation 10
• The following are the types of capital allowances available under the
PPT:
• Annual Allowances,
• Balancing Allowance (if any), and
• Petroleum Investment Allowance
15
Annual Allowances
• Annual allowances is granted annually on cost at a flat rate of 20% until the
residue of the item (i.e. the TWTDV) is 1% of the original cost. That is the tax
(estimated useful) life of assets representing a qualifying capital
expenditures incurred by Petroleum Company is 5 years.
• Therefore, the cost of the asset is amortized over the period of five years in
an equal amount except in the fifth year when 1% of the amount is retained
(i.e. only 19% of the cost is claimable in the fifth year). The 1% of the original
cost is retained in the book until the item is disposed.
• Assets on which capital allowance has been granted can only be disposed on
the authority evidenced by the issue of certificate of disposal by the Minister
or any other person authorized by him.
Annual allowance rates are
• Year 1 20%
Year 2 20%
Year 3 20%
Year 4 20%
Year 5 19% (1% retained in the book)
16
Petroleum Investment Allowance (PIA)
• Petroleum investment allowance is granted only once in the useful life of life
of the item representing the qualifying capital expenditure and it is usually in
the first year of use.
• This allowance is similar to and share the same characteristics with initial
allowance. Prior to 1995 YOA, it is called investment tax credit and treated as
a tax offset.
• However, WEF 1995 Tax Year, investment tax credit is to be known as
petroleum investment allowance and to be treated like capital allowance.
Also
• PIA Rates
• The rate at which investment allowance is claimed depends on the location
of the qualifying capital expenditure as follows:
• (1) On shores operations 5%
(2) Off shore operations:
• (i) Areas up to and including 100 metres continental waters - 10%
(ii) Between 100 and 200 metres continental waters - 15%
(iii)Beyond 200 metres continental waters - 20%
17
Restriction on Capital Allowance
FEEDBACK